USPS Board Picks Earlier-Than-Expected Implementation Date for New Rates 

The following is some news and a comment by PostCom Vice President Kate Muth.

The mailing industry was not surprised by the Board of Governors decision to accept the recommendation of the Postal Rate Commission in R2005-1, but some in industry were taken aback by the governors’ announcement that the new rates would take effect on Jan. 8, 2006. Industry had expected implementation on Jan. 15 or later.   

This decision to implement a week earlier than expected feels a little like sibling rivalry run amuck. Anyone from a competitive family knows the feeling: Your brother or sister picks something different from what you expected just to be contrary. No other reason really, just a chance to stick it to a family member. The BOG’s announcement makes the Postal Service-industry partnership seem a little like a “dysfunctional family affair.” 

Industry had been expecting implementation on or after Martin Luther King Day, which seemed reasonable given that USPS finances through fiscal year 2005 were strong, and most parties to the rate case signed on in settlement rather than participate in a lengthy litigation process. So the choice of Jan. 8 is baffling. Only a couple of months ago, mailers were working to convince postal officials that the new rates might not be needed until late winter given the strong finish to FY 2005.  

Postal officials made clear when they filed the R2005-1 case that the 5.4 percent, across-the-board increase was needed to pay the statutory escrow account set to take effect at the end of fiscal year 2006. The USPS asked for an expedited process and the Postal Rate Commission complied. Many mailing groups signed on to settlement, recognizing the unique situation involved in this case. They signed with the understanding that all rates would go up by about the same average increase and expecting that the rates would take effect 60 days from a BOG ruling on the recommended decision.  

In announcing its decision, Jim Miller, Chairman of the Postal Service's Board of Governors, said:  “The Governors take this action mindful of our obligation to assure the financial integrity of the nation's postal system. These increases will allow the Postal Service to meet the obligation established by Congress to place funds in escrow in 2006.” 

Unfortunately for some types of mailers, the 5.4 percent increase was not the case. The Media Mail and Library Rate users got hit with average increases above 12 percent. The double whammy for these mailers is an increase above the system-wide average and implementation a week earlier than expected.  

Now I know the BOG sets the implementation date and just because people talked about a certain date doesn’t mean that’s what the board must pick. But knowing that the board couldn’t come out with its decision before mid November and counting forward 60 days, Jan. 15 seemed like the logical date. This leaves industry scratching its head wondering why the board couldn’t push back the date one week, which would have made implementation 62 days from its announced decision instead of 55 days. 

In some quarters there is a sigh of relief that the implementation date is not Jan. 1. And there’s also some speculation that a strong start to the 2006 fiscal year means the USPS can push back the filing of its next rate case by a month or two. An earlier date for higher rates to take effect would boost revenue a notch. This point makes some sense, which is exactly why I wouldn’t bet the house on it. A Jan. 15 implementation date for the R2005-1 new rates made perfect sense too.